Special Litigation Committees: Part 1

April 2021

A Special Litigation Committees (SLC) is an ad hoc committee often comprised of two or more disinterested directors who are charged with overseeing an investigation of alleged wrongdoing by stockholders against others—including other directors and a company’s officers. The need for an SLC is often triggered by stockholder demands or derivative suits. Ultimately, an SLC must determine one of the following:

• Whether the company’s best interests warrant claims against the alleged wrongdoers,
• Whether the investigation identified no wrongdoing and, therefore, no further action is necessary.

Because such decisions can serve as a complete defense in a derivative action, ensuring proper processes were followed along the away is imperative, beginning with pre-SLC formation stockholder book and record requests.